This week, as a change-of-pace, we have a guest appearance on our blog. Fiduciary Doctors is a firm with whom we collaborate on many client relationships. We value their experience, expertise and candor with regard to the many fiduciary issues faced by companies that sponsor retirement plans. We hope you enjoy reading their post as much as we have. You can find them at www.fiduciarydoctors.com.
Perceptions of the Financial Industry
Since Fiduciary Doctors LLC is in the business of helping Plan sponsors and participants manage their 401(k) investments, I pay attention to how investment issues and even issues concerning fiduciary standards are played out in the populate media. Some of it is very heartening. I’m pleased to see ads educating the public about hidden fees and getting the public to think about how their financial professional is being paid. Other ads admonish people to take action if they want to retire, that they need to save and invest regularly. People are instructed to take the first step by using the money in their wallet to get started and that over time, that amount grows. Commercials also state that it’s easier to make incremental progress rather than looking for big, dramatic fixes. Ads advise people to perform due diligence on investment service providers and that credentials are important; all financial advisors and planners do not have the same qualifications. The financial services industry should be proud of how they are able to convey some basic concepts about investing in a relatively short period of time. It’s not an easy task but some of the commercials below are iconic, informative and clever. Ads that inform people to be realistic, to consistently invest, to diversify, to understand the business model of those that they work with and their incentives, to perform due diligence, and to pay attention to fees are all actions that fiduciaries and savvy investors should do.
I’ve included some of my favorite television spots, radio spots and online ads below.
I found one of my favorite advertisements by searching on YouTube. I had never heard of The Mutual Fund Store before but after viewing the commercial, I’ll remember who they are. The announcer in the first commercial, “Cowboy,” tells the listener that he’s too old to be a cowboy or an astronaut. This ad speaks to a lot of people who did not end up in their dream career. The next ad is even darker about how people feel about their jobs and that the goal is NOT to work forever. A man gives a speech at his retirement party, calling his company a “soul stealing, miserable, mismanaged corporate torture chamber.” If he hadn’t been savvy about investing for retirement, he’d be doomed. It’s not an uncommon feeling. The third Mutual Fund Store radio spot is a call to action, reminding people that: “retirement does not happen by magic.”
Other all-time favorites are the E-Trade Baby commercials. These ads cover a whole range of investment issues; there’s a lot to be learned from the mouthy and cynical E-Trade Baby. One memorable commercial shows an uncomfortable, strapped-in E-Trade Baby, who is being jostled as his mother is furiously searching for something around in her giant Mom bag and in the kitchen drawers. The Baby wonders if she is searching for hidden fees. Also, a Super Bowl advertisement shows the E-Trade Baby offering advice on how to blow a huge wad of cash having fun instead of on hidden fees. While less instructive, my very favorite is when the E-Trade Baby is given a “time-out” for riding his dog as if it was a horse, an act that “is frowned upon in this establishment.” Luckily, he hid his tablet under his blanket, so he can monitor his investments online with E-Trade until his mother snatches his tablet. He’s “in solitary” but cheers up once he pulls out his hidden smart-phone with an E-Trade App. Check out the collection of the E-Trade Baby Greatest Hits.
Recently, the CFP put out a public service spot highlighting the importance of advisor credentials. A well-groomed advisor meets with two clients in his impressive office and uses a couple of terms such as “asset allocation.” The advisor asks his clients if they trust him as their financial advisor. They do. He then reveals that he’s clueless about finances. He really is a Dee-Jay, who cleaned up nicely– getting the point across to look beyond the superficial.
Charles Schwab makes its point by using conversations between fathers and sons, with father not knowing best. The first commercial shows a very young child asking questions about how much the broker charges and can the father get his money back if he’s not satisfied. The second commercial shows an adult child who’s used to navigating online. They are eating dinner and the father tells the son that he should start investing and offers to give him the name of his broker. The son asks about the fees that he charges and when the father seems clueless, the son challenges him. In both commercials, fathers chide their sons for being naïve when in truth, the fathers are old-fashioned.
Obviously, not all ads put out by the financial services industry belong in the Fiduciary Hall of Fame but instead, they belong in the Fiduciary Hall of Shame. Many ads play to people’s fear or to their greed. If an ad recommends an investment that has low risk and high yield, the company being hawked is trying to quickly part a fool and his/her money. If an ad touts certain assets, such as gold and silver (Merit Financial, anyone), then pay attention. This firm marketed very aggressively and switched potential clients from investing in bullion to investing in coin collections. There are a lot of red flags to look for. Also, lobbying organizations with innocuous sounding names, such as the Americans to Protect Family Security, have put out public service announcements (PSAs) that create distorted impressions. This lobbying group’s members are life insurance companies, agents, and financial advisors who provide life insurance, retirement annuities, long-term care, and disability income insurance. The government and Washington make convenient punching bags in these ads. It’s easy to side with the husband and wife and the small businessman in these ads yet these ads never made clear who this group was protecting.
Ultimately, a thirty second spot is meant to convey some high level concept and appeal to people’s emotions. The trend in ads to get people to think about what they should be doing is encouraging, however, it is not surprising that many ads encourage fear and greed, as well as mislead people.